Under normal circumstances, numbers trending in a downward direction wouldn’t typically bode well for retailers but when it comes to shrink, it is good news indeed. In fact, according to the 2018 National Retail Security Survey, which was conducted by the University of Florida in partnership with the National Retail Federation (NRF) and Appriss Retail, retail shrink decreased from $48.9 billion in 2016 to $46.8 billion in 2017.
The survey, which polled loss prevention and asset protection professionals from 63 retailers, also found that shrink averaged 1.33 percent of sales, down from 1.44 percent the year before. In addition, 59 percent of retailers reported that shrink was flat or decreasing, better than the 51 percent in last year’s survey, and only 41 percent said that shrink was growing which was down from 49 percent in 2016.
For the fourth consecutive year, external theft, which consists of shoplifting and organized retail crime, accounted for the majority of shrink losses (36 percent), followed by internal employee theft (33 percent), administrative paperwork errors (19 percent) and vendor fraud or mistake (6 percent).
The most substantial losses for retailers per incident came via robberies, at an average $4,237.02 each (down from $5,309.72 the year before), followed by employee theft at $1,203.16 (down from $1,922.80) and shoplifting/ORC at $559 (down from $798.48).
Bob Moraca, Vice President of Loss Prevention for the NRF, says the fact that external crime continues to outpace internal theft is significant.
“For the first 21 years of this survey, the internal threat and internal misappropriation with unscrupulous employees stealing from their employers beat out external crime,” Moraca says. “That shows us two things: one is that retailers are getting better at controlling internal theft with training and more advanced technology, such as video surveillance systems and things of that nature. The second is that we’re still fighting that external crime, which is unfortunately increasing. “
Retailers are also losing less on average per shoplifting incident. According to the survey, in 2017, nearly half (48.9 percent) of respondents experienced an average loss of $300 or more. However, in 2018, that dropped to 33.3 percent.
“What retailers are doing now is putting less of those higher end items on the shelf. They may even put just the box on the shelf with a note that says, ‘If you want this item, please see one of our associates,” Moraca explains. “Instead of having seven or eight of them out on the sales floor so that people can steal them somehow, they are putting these things in caged areas, behind locked glass or any of the techniques where you take high-end items and put them aside. Some of these nuanced approaches are helping reduce these larger thefts and I think that is helping to bring our (shrink) numbers down.”
Despite theft numbers trending in the right direction, the survey also revealed several areas of concern. For example, an increasing number of retailers continue to suffer from shrink rates well above the average. In 2015, the survey found that only 17.1 percent of retailers had a shrink rate at 2 percent of their sales or more, however; that number rose to 20 percent of respondents this year. The number of retailers who say they’ve experienced shrink as 3 percent or more of sales has also grown substantially, from 5.4 percent in 2016 to 9 percent last year.
Security Tech Use Varies
Additionally, while more than a third of respondents saw increases in loss prevention staffing and overall budgets, some of the tools used to deter both internal and external theft have dropped in use.
Among the retail loss prevention systems that that saw the biggest decreases in this year’s survey include:
- Cables, locks and chains (34.9 percent, down from 57. 1 percent in 2017)
- Acousto-magnetic, electronic security tags (22.2 percent, down from 44.4 percent)
- POS data mining (57.1 percent, down from 76.2 percent)
- Live customer-visible CCTV (54 percent, down from 73 percent)
- Merchandise alarms (20. 6 percent, down from 36.5 percent)
Conversely, several other solutions also saw their use in this year’s study increase, including:
- Simulated, visible CCTV (41.3 percent, up from 14.3 percent in 2017)
- Observation mirrors (22.2 percent, up from 12.7 percent)
- Theft deterrent devices, such as spider wraps/keepers, etc. (41.3 percent, up from 33.3 percent)
- Plainclothes store detectives (30.2 percent, up from 22.2 percent)
- RF electronic security tags (30. 2 percent, up from 22.2 percent)
Moraca believes the uptick in the use of theft deterrent devices represents a positive development for loss prevention as it demonstrates that these technologies have become more mature and subsequently more effective in reducing theft.
“They (spider wraps) are a deterrent because they are a lot easier to spot and they are much harder for an individual to remove. Instead of ripping off a small piece of the packaging where they know a tag is, they have to mess around with this whole big spider thing and some of them even have built-in alarms so if someone tries to take it off without the proper key it will alarm. The technology has gotten better,” he adds.
Loss Prevention’s Role in Cybersecurity
For the first time, the survey also sought to determine what role loss prevention professionals are playing in helping to battle cybercrime and the results were largely positive. More than 85 percent respondents said their companies had a cybersecurity incident response plan in place and about two-thirds of LP professionals indicated that they meet at least quarterly with their counterparts on the IT/cybersecurity side of the house. However, just over 14 percent said they never have such meetings with cybersecurity pros, which Moraca says is concerning.
“There is a real improvement that needs to take place there,” he says. “Loss prevention has to have a seat at the table because what you find if you have a cyber breach is that you need people with investigative skills. Someone has to look into what happened and how it happened. Believe it or not, cyber professionals will tell you that 90 percent of the breaches that take place still happen between the ‘keyboard and the seat’ and there is still a human element involved. Someone will click on something they shouldn’t, use a flash drive that is corrupted or you may have an unscrupulous employee, so the investigative prowess that loss prevention brings to the table is important.”
Overall, Moraca says that retailers need to “stay the course” in their loss prevention efforts by continuing to push for the manpower and technology solutions they need to put a greater dent in shrink moving forward.
“In loss prevention, every dollar that you avert as a loss is a profit dollar that goes right to the bottom line. These are dollars that you already spent all of your overhead on, they are not on the shelf, they are not getting sold and you are not making that 2, 3, 7 or 8 percent profit on them,” Moraca concludes.
About the Author:
Joel Griffin is the Editor-in-Chief of SecurityInfoWatch.com and a veteran security journalist. You can reach him at [email protected].
